B-BBEE codes: DA requests urgent meeting with Minister Davies 

The DA will request an urgent meeting with the Minister of Trade and Industry, Rob Davies, to discuss the Codes of Good Practice for Broad-Based Black Economic Empowerment (B-BBEE) published on Friday (see here - PDF).

We support any initiative to create more opportunities for South Africans. B-BBEE is one of the most powerful instruments for doing so, if it is genuinely broad-based. Our concerns with the Codes are that they will not achieve sufficiently broad-based empowerment - hence our request to meet with Minister Davies. 

The Codes confirm that the Department of Trade and Industry (DTI) has not changed its mind on its decision to increase the threshold of the value of equity previously held to qualify as a "new entrant" from R20 million to R50 million.

The DA believes that steps must be taken to ensure that B-BBEE does not become a tool for elite enrichment - we therefore argued for lowering the threshold in the definition of "new entrants" to R10 million and increasing the points that can be earned by involving new entrants and workers in empowerment transactions.

This would prevent the B-BBEE codes from incentivising the enrichment of the already empowered.

DTI clearly has not applied its minds to comments received on the draft Codes published in October 2012.

During the proposed meeting the DA will ask that the Minister provide details on the comments received by DTI on the 2012 draft Codes, how they were considered and whether DTI consulted any third parties in drafting the latest version of the Codes.

We will also request a full regulatory impact assessment on the implementation of these Codes.

Business and civil society raised serious principled and technical concerns around the 2012 draft Codes. It is clear that these concerns were not seriously considered by DTI. 

This is a severe and worrying example of a misuse of basic legislation which gives extensive powers to the Minister to push through regulations without appropriate consultation.

There is a very real risk that the cost of compliance with the Codes published will have a number of unintended consequences, including:

• Businesses may choose to withdraw from the empowerment process entirely; or
• Disinvestment in the South African economy, resulting in thousands of job losses. 

Only two substantive changes were made to the October 2012 draft Codes, namely: 

• Entities who do not comply to the minimum thresholds for key empowerment elements will now only drop 1 level (the October 2012 Codes proposed a 2-level drop); and 
• There was a change to the definition of "empowering suppliers" (making it even more difficult to reach procurement targets).

The DA remains opposed to the inclusion of minimum threshold requirements of 40% for ownership, skills development and enterprise and supplier development in the Empowerment Scorecard.

The Codes continue use racial sub-categories in the targets for skills development and employment equity. This poses a particular challenge, because:

• It does not seem to take regional differences into account; and 
• It requires an even greater degree of racial categorisation (versus the 2007 Codes in which "black" included African, Coloured and Indian and relied on self-identification).

We trust Minister Davies will agree to meet with us and listen to our concerns. We cannot allow politics to stand in the way of the much needed reforms required to implement truly broad-based empowerment initiatives in South Africa. 

The Codes, in their current form, will not result in the building of an inclusive economy.

We will do everything in our power to get the Minister to amend them.

Statement issued by Dr Wilmot James MP, DA Shadow Minister of Trade and Industry, October 13 2013

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